The pressure on Papandreou's socialist government to fix the crisis by yesterday is a product of the wider recession.

February 18, 2010

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The knot, as we say in Greece, has finally reached the comb. The economic crisis that is exercising bankers, Eurocrats and the European media has been decades in the making; the country’s litany of woes trips easily off Greek tongues, from graft to tax evasion, from creative accounting to a gargantuan, hungry public sector, from capital flight to a chronic lack of development policy. But the pressure on George Papandreou’s socialist government, not yet five months old, to fix it all by yesterday is a product of the wider recession and the global financial meltdown. If Greece defaults on its loans, the argument goes, this will further depress the euro (already being dragged under by circling speculators) and suggest the nightmare scenario of domino defaults, currency defections in the euro zone and the collapse of the whole implausible enterprise, which Timothy Garton Ash once called a “hair-raising adventure…of unification through money.”

Radical economic reform is long overdue in Greece, for the sake of those who live there rather than Europe’s bankers. The holes in the fabric are becoming painfully obvious: for months now hospital suppliers have gone unpaid, as have university lecturers and other public employees. Farmers, long dependent on subsidies in the absence of any rural development plan, blockaded the roads this winter with the tractors they use to grow the crops they can’t sell for a living wage. The rot goes all the way back to the early days of the state, when votes were routinely rewarded with civil service sinecures; some 30 percent of Greeks now work in the public sector, with jobs guaranteed for life. The culture of graft is endemic and paying taxes is for fools, while immigrant-bashing and scaremongering about the Republic of Macedonia stand in for patriotism.

Every Greek government since the 1980s has in effect colluded in the black economy; but then, so have Brussels and the banks. Greece joined the euro in 2000 on the basis of cooked books and a brief boom built on the labor of the first migrants from Albania and Eastern Europe. According to the New York Times, Goldman Sachs was on the scene by 2001, setting up secret schemes to mask the deficit. The Athens Olympics in 2004, hailed as the rebranding of the new hub of the Balkans, cost the country some $11.6 billion, roughly 5 percent of that year’s GDP.

Greeks are desperate for change, at least in theory: Papandreou was elected on a platform of transparency, accountability and reform by a population sick to death of corruption, incompetence and lucrative government scams, which the previous administration took to dramatic new heights of virtuosity. Greece has not asked for a bailout; the government’s plan features a restructuring of the tax system, a crackdown on tax evasion, pay cuts for public sector workers including government ministers, pension reform, a public sector hiring freeze and a one-to-five replacement rate for retiring civil servants. But even these measures may not be enough for the EU’s finance ministers, who as I write are demanding deeper cuts and tighter control over the Greek economy.

So far, reaction in Greece to the proposed austerity measures has been muted, even numb. The one-day strike called by public sector unions on February 10 was a mere face-saving exercise; though there are more to come, the dire predictions in the European press of riots and military coups are wildly exaggerated. Most of the unions support the ruling PaSoK party. Their loyalty has limits, but it gives Papandreou some leeway. And as a low-paid friend in the public sector put it, “What good does it do to strike when it just means the government gets to keep my pay?” There’s been no sign of the kids who took to the streets in December 2008 after a 15-year-old was shot dead by police; that was a spontaneous uprising against politics as usual, the lack of a viable future, a government that combined indifference with repression. The pensioners and civil servants who stood under their umbrellas in the pouring rain are as frightened as they are angry. Northern Europeans may scoff at the Greeks’ easy ride, but many of those who will be most affected by the cuts already work two or three jobs to make ends meet, to get their children the extra tuition they need to be employable, to pay Parisian prices on Athenian wages; nor does the struggle end when they “retire.” Though they are not the ones who have profited from the system, they’ll have to foot the bill.

Of course, the mood may change if Brussels tightens the thumbscrews and Greek self-determination–and, by implication, the self-determination of the rest of Europe’s periphery–is shown to be a sham. Greece’s entry into the EU in 1981 marked a recognition of its return to democracy after the fall of the military dictatorship seven years before. It will be an ugly irony if it must now be ruled by bankers and politicians its people did not elect.